The threshold before people benefit from tax breaks by leaving money to charity is jumping from £325,000 to £425,000
Changes to inheritance tax rules could mean less people are likely to leave money to charities in their wills, experts have warned.
Remember a Charity estimates the increase to the tax threshold, due to come in to place this Thursday (6 April), will mean 15,000 estates every year will now no longer need to make use of tax breaks gained by leaving a charity donation behind.
With an average of 8% of those estates currently likely to leave a donation of around £20,000 that could mean an income drop of £24 million for the sector.
Remember a Charity, a membership organisation which is made up of over 160 charities trying to increase legacy giving, fears solicitors will now not bother speaking to people about leaving a donation in their will.
“Tax breaks are a natural entry point for solicitors and will-writers to raise the option of charitable giving during the will-writing process,” Rob Cope, director of Remember A Charity, said.
“But with the tax changes, our concern is that fewer people will be aware of their charitable options which will be a real threat to legacy giving."
Inheritance tax is currently charged at 40% on assets above the £325,000 threshold of an estate or at a reduced rate of 36% for those who leave at least 10% to a charity.
On Thursday, the threshold will increase to £425,000 for direct descendants inheriting the main family home and to £500,000 by April 2020.
Recent research showed that Brits left £2.5 billion to charity last year.
Legacy giving has become an increasingly popular way to donate to charity, having increased by 39% over the last five years.
The charity which benefitted the most in Scotland was the National Trust for Scotland which received £7.77m in 2016.
Cope added that charities now need to work closer with financial advisers and government, emphasising the importance of legacy giving and the need for greater fiscal incentives like VAT-free charitable wills.